Appellate Tribunal For Electricity
Tata Teleservices Limited vs Rajasthan Electricity Regulatory ... on 20 May, 2013
Appeal No.88 of 2012
Appellate Tribunal for Electricity
(Appellate Jurisdiction)
APPEAL No.88 of 2012
th
Dated:20 May, 2013
Present: HON'BLE MR. JUSTICE M KARPAGA VINAYAGAM,
CHAIRPERSON
HON'BLE MR. RAKESH NATH, TECHNICAL MEMBER
In the Matter of:
Tata Teleservices Limited.,
2A, Old Iswar Nagar,
Main Mathura Road,
New Delhi-110 065
...Appellant
Versus
1. Rajasthan Electricity Regulatory Commission,
Vidhyut Viniyamak Bhawan, Sahakar Marg,
Near State Motor Garage,
Jaipur (Rajasthan)
2. Jaipur Vidyut Vitran Nigam Limited.,
Vidyut Bhawan, Janpath,
Jaipur-302 005,
Rajasthan
3. Ajmer Vidyut Vitran Nigam Limited.,
Hathi Bhata, City Power House,
Jaipur Road,
Ajmer-305 001
Rajasthan
4. Jodhpur Vidyut Vitran Nigam Limited.,
New Power House, Industrial Area
Jodhpur-342 003
Rajasthan
...Respondent(s)
Page 1 of 40
Appeal No.88 of 2012
Counsel for the Appellant(s) : Mr. Amit Kapur
Ms. Sughandha Somani
Mr. Vishal Anand
Counsel for the Respondent(s): Mr. R K Mehta,
Mr. David A
Mr. Antaryami Upadhyay for R-1
Mr. Pradeep Misra
Mr. Daleep Kr. Dhayani
Mr. Manoj Kr Sharma for R-2 to 4
J U D G M E NT
PER HON'BLE MR. JUSTICE M. KARPAGA VINAYAGAM,
CHAIRPERSON
1. M/s. Tata Tele Services is the Appellant herein.
2. Aggrieved by the impugned order dated 8.9.2011 passed by
Rajasthan State Electricity Regulatory Commission re-
categorising the Appellant from ML/LT-7 to Non-domestic
Service ("NDS") category, the Appellant has presented this
Appeal.
3. The Short facts are as under:
(a) The Appellant, a telecom service provider is an
essential service provider. Jaipur Vidyut Vitran Nigam
Limited (R-2), Ajmer Vidyut Vitran Nigam Limited (R-3)
and Jodhpur Vidyut Vitran Nigam Limited (R-4) are the
Distribution Licensees in the State of Rajasthan.
Page 2 of 40
Appeal No.88 of 2012
(b) In January, 2011, Jaipur Distribution Company
(R-2) filed a Petition before the State Commission for
determination of the Annual Revenue Requirement
(ARR) and Retail Tariff for the Financial Year 2011-12.
In the said Petition, the Distribution Company proposed
for modification in the Non-domestic Category praying
for the inclusion of the telephone Companies run on
commercial basis in the Non-domestic Service category
by shifting them from ML/LT-7 category.
(c) On this Petition, public notice was issued. After
observing all the procedure and after hearing the public
and also after considering the suggestions and
comments from the consumers, the State Commission
passed the impugned order by which the
telephone/mobile exchanges i.e. Appellant's Category
was re-categorized by shifting from ML/LT-7 to Non-
domestic Service (NDS) category.
(d) In this public hearing, the Appellant did not
participate in the proceedings before the State
Commission. They came to know about the order re-
categorising the Appellant category as Non-domestic
Service (NDS) category only on 15.10.2011 when
Rajasthan Distribution Companies raised the bills upon
the Appellant charging the Appellant's tariff applicable
for Non-domestic Service category. On receipt of the
Page 3 of 40
Appeal No.88 of 2012
same, the Appellant sent various representations to the
Government of Rajasthan as well as to the Distribution
Companies seeking for issuance of suitable directions
and instructions to Rajasthan State Commission to
revisit the impugned order. However, there was no
response either from the Government or the
Distribution Companies.
(e) Therefore, the Appellant filed the present Appeal
challenging the impugned order dated 8.9.2011.
4. The learned Counsel for the Appellant has made the
following submissions to challenge the impugned order
re-categorising the Appellant from ML/LT-7 to Non Domestic
Service category:
(a) The State Commission has re-categorised the
Appellant by shifting from ML/LT-7 to Non Domestic
Service Category in contravention of Section 62 (3) of
the Electricity Act, 2003 after having failed to take into
consideration that the Commission can differentiate the
consumers in different categories only on the basis of
the criteria specified u/s 62 (3) of the Electricity Act and
not otherwise.
(b) The State Commission while re-categorising the
Appellant, failed to consider the nature and purpose for
which the supply is required by the Appellant i.e. to run
Page 4 of 40
Appeal No.88 of 2012
essential facility of telecom services which cannot be
treated at par with other consumers placed in Non
Domestic Service Category.
(c) The State Commission while re-categorising the
Appellant has violated National Electricity Policy which
mandates the State Commission to take into
consideration the tariff in such a manner that the cross
subsidy level is maintained at + 20% of the average
cost of supply. It has also contravened the IT and ITES
Policy, 2007 of the Government of Rajasthan which
induced the investments by fixing the power related
incentives to IT and ITES industries including the
Appellant's category by categorising them from
commercial to low tension industry category.
(d) The State Commission has failed to consider that
the Appellant is an essential service provider to the
public and accordingly the tariff of the Appellant should
have been determined near cost of supply having
regard to the nature and purpose for which the supply
was made.
5. On these grounds, elaborate arguments were made by the
learned Counsel for the Appellant.
6. The learned Counsel for the Respondent State Commission
before answering these issues raised preliminary objection
Page 5 of 40
Appeal No.88 of 2012
with regard to the maintainability of this Appeal. The crux of
the objection raised by the learned Counsel for the State
Commission, is as follows:
"The present Appeal at the instance of the Appellant is
not maintainable since the Appellant did not file any
objection before the State Commission in response to
the public notice issued by the State Commission. In
fact, both in the proposal made by the Distribution
Licensee before the State Commission as well as in
the public notice as directed by the State Commission,
the prayer of the Distribution Licensee seeking for the
changes in existing categorisation had been
mentioned. Despite the publication of this public
notice, the Appellant neither filed any objection nor
appeared during the public hearing before the State
Commission questioning the change of existing
categories. No reasons whatsoever have been given
by the Appellant for not filing objection before the
State Commission in spite of the public notice. Since
the Appellant chose not to file any objection before the
State Commission, the State Commission did not
have any opportunity to adjudicate upon such
objection. Even in the case where the party who had
filed objection before the State Commission, files an
Appeal on the grounds which were not raised before
Page 6 of 40
Appeal No.88 of 2012
the State Commission, this Tribunal would not
normally permit those grounds to be raised in the
Appeal on the basis that the said grounds of objection
were not raised before the State Commission. When
such is the position of law, the person who neither
appeared before the State Commission nor raised the
grounds of objection referred to in the Appeal, cannot
be permitted to file the Appeal raising all these
grounds. Therefore, the Appeal by the Appellant is not
maintainable.
7. On the other hand, the learned Counsel for the Appellant
submitted that the Appellant being aggrieved over the
impugned order with regard to change of categorisation, is
entitled to file the Appeal u/s 111 of the Electricity Act, 2003.
8. Before dealing with the main grounds urged by the
Appellant in the Appeal, it would be proper to consider the
question of maintainability of this Appeal raised by the
Respondent Commission as a preliminary objection.
9. The perusal of Section 111 (1) of the Electricity Act, 2003
would show that any person aggrieved by any order of the
Appropriate Commission can prefer an Appeal before the
Tribunal. The same is as follows:
"111. Appeal to Appellate Tribunal:
Page 7 of 40
Appeal No.88 of 2012
(1) Any person aggrieved by an order made by an
adjudicating officer under this Act (except under
Section 127) or an order made by the
Appropriate Commission under this Act may
prefer an appeal to the Appellate Tribunal for
Electricity:
Provided that any person appealing against the
order of the adjudicating officer levying any
penalty shall, while filing the appeal, deposit the
amount of such penalty:
Provided further that where in any particular
case, the Appellate Tribunal is of the opinion that
the deposit of such penalty would cause undue
hardship to such person, it may dispense with
such deposit subject to such conditions as it may
deem fit to impose so as to safeguard the
realisation of penalty."
10. According to the Appellant, a person, even though he was
not a party to the original proceedings, may still prefer an
Appeal with leave of the Appellate Tribunal provided that the
person claiming himself to be aggrieved shall show the
prima facie case as he is aggrieved and as to how he is
aggrieved and if that is established, the Appeal would
become maintainable. In that context, it is stated by the
Appellant that the Appellant feels aggrieved by the
impugned order wherein the Appellant has been categorised
by shifting from ML/LT-7 category to Non Domestic Service
Category resulting in (a) categorisation of the Appellant
being an essential service provider with the commercial
Page 8 of 40
Appeal No.88 of 2012
consumers (b) tariff shock to the Appellant. This aspect
requires consideration.
11. It is true that the Appellant despite the public notice did not
choose to appear before the State Commission to raise
objection with regard to change of categorization. In this
regard, the Appellant has submitted that the public notice
dated 11.1.2011 which was issued inviting suggestions and
objections did not specifically propose any change in
category of consumers of ML/LT-7 category or the category
of the telecom service providers. Though it is submitted by
the learned Counsel for the State Commission that the
distribution licensee has made proposal with regard to
change in the existing categorisation, it is noticed that the
said public notice dated 11.1.2011 did not specifically refer
to the proposal for any change in category of consumers of
ML/LT-7 Category or the category of the telecom provider
i.e. the Appellant's category.
12. According to the learned Counsel for the Appellant, in that
situation, the Appellant felt that it was not necessary to
participate in the public hearing as the issue relating to the
category of the Appellant was not the subject matter of the
public notice.
13. On the other hand, the learned Counsel for the State
Commission submitted that if the Appellant had appeared
Page 9 of 40
Appeal No.88 of 2012
and raised those grounds as an objection before the State
Commission, the said objection would have been considered
by the State Commission who in turn would have given a
finding on that and this opportunity had not been given to the
State Commission. We find force in this submission. But,
the question here is whether the Appellant can be
considered to be a person aggrieved or not, despite his non
appearance before the State Commission.
14. What is the definition of a "Person Aggrieved"? A person
aggrieved means a person who has suffered a legal injury, a
person against whom a decision had been pronounced and
a person who had been deprived of a legal right.
15. If this is the definition, then it has to be held that the
Appellant can also be considered as an aggrieved person
since the Appellant claims that because of the re-
categorisation of the Appellant's category by shifting from
ML/LT-7 Category to Non Domestic Service Category, a
tariff increase is resulted to the Appellant. Therefore, in
spite of the fact that the Appellant did not file objections nor
appeared in the tariff proceedings before the State
Commission, the Appellant has to be considered as an
aggrieved person. The same principle has been laid down
by this Tribunal in 2010 ELR (APTEL) 404 BSES Rajdhani
Power Limited Vs DERC and in Appeal No.182 of 2011 in
Page 10 of 40
Appeal No.88 of 2012
the case of M/s. Rajasthan Steel Chambers vs Rajasthan
State commission.
16. The relevant observations in the case of BSES Rajdhani
Power Limited vs DERC 2010 ELR (APTEL) 404 are given
as below:
"11...
(i) A person who was not a party to the original
proceedings may still file an Appeal with leave of
the Appellate Court, provided that the person
claiming himself to be the aggrieved party shall
make it a prima facie case as to how he is
aggrieved.
(ii) A person can be said to be aggrieved by an
order only when it caused on him some prejudice
in some form or another unless the person is
prejudicially or adversely affected by the order, he
cannot be entitled to file an Appeal as an
aggrieved person.
(iii) The words "person aggrieved" did not mean
a man who is merely disappointed of a benefit
which he may have received if some other order
had been passed. A person aggrieved means a
person who has suffered a legal grievance, a
person against whom a decision has been
pronounced which have wrongly deprived him of
something or wrongfully refused him something or
wrongly affected his title to something.
(iv) When a person had not been deprived of a
legal right, when he is not subject to legal wrong,
when he has not suffered any legal grievance,
when he has no legal peg for a justifiable claim to
Page 11 of 40
Appeal No.88 of 2012
hang on, he cannot claim that he is a person
aggrieved".
17. The relevant observation in Appeal No.182 of 2011 in the
case of M/s. Rajasthan Steel Chambers vs Rajasthan State
Commission are as follows:
"13. We are also not impressed by the plea
adopted by the 1st Respondent that since the 1st
Appellant had not raised the issue of cross
subsidy before the State Commission, the same
cannot be raised in Appeal before this Tribunal.
The licensee is required to publish its proposals
submitted before the State Commission the
abridge form inviting comments from all the stake
holders under Section 64(2) of the Act.
Accordingly, the stake holders submit their
comments/objections to the proposals of the
licensee. There could be circumstances where a
person is not affected by the proposals of the
licensee but could get aggrieved by the final
order of the State Commission. Further, any
person aggrieved by the final order of the State
Commission could approach this Tribunal in
Appeal for redressal of its grievance."
18. In view of the settled position of law, we decide the
preliminary question by holding that the Appeal has been
filed by the Appellant as an aggrieved person over the
impugned order and as such, the Appeal is maintainable.
19. Let us now deal with the other grounds urged in this Appeal.
20. The learned Counsel for the Appellant has urged following
contentions as referred to in the earlier paragraphs:
Page 12 of 40
Appeal No.88 of 2012
(a) The State Commission in the impugned order
has re-categorised the Appellant from ML/LT-7
category to Non Domestic Service Category on the
grounds that telephone Companies run on commercial
basis. This reasoning is wrong and unjust as it is
contrary to Section 62 (3) of the Act and Regulation
123 of the Rajasthan Electricity Regulatory
Commission (Terms and Conditions for Determination
of Tariff) Regulations, 2009. As per this section and
Regulation, the State Commission while determining
the tariff shall not show undue preference towards any
consumer of electricity unless on the basis of some
certain specific criteria based on which the consumer
may be classified in different categorisation. The State
Commission without taking into consideration the
nature and purpose, for which the electricity supply is
required by the Appellant, changed the category of the
Appellant from ML/LT-7 to Non Domestic Service
Category even though the electricity consumed by the
Appellant Telecom Companies is to render essential
public services. Thus, the purpose for which the supply
is required by the Appellant is different from other
consumers falling in Non Domestic Service category.
Non Domestic Service category constitutes commercial
consumers such as malls, multiplexes, shops and
offices etc., Since the Appellant is providing essential
Page 13 of 40
Appeal No.88 of 2012
infrastructure services, it cannot be compared with
other consumers falling under Non Domestic Service
Category.
(b) The State Commission failed to comply with the
mandate of National Electricity Policy to maintain the
cross subsidy level at + 20% of the average cost of
supply. The tariff of the Appellant was increased from
Rs.3.75 to Rs.5.90 i.e. 58% increase. This resulted in
the tariff shock to the Appellant.
21. In reply to the above grounds, the Respondents in
justification of the impugned order have submitted the
following:
(a) While determining the tariff, the State
Commission has not shown undue preference to any
consumer as all mobile telephone service providers
either Government or privately owned, have been kept
at par and accordingly the State Commission has fixed
the tariff for the telecom sector u/s 62 (3) of the Act by
proper categorization.
(b) Since the tariff of the Appellant and similarly
situated consumers has been modified after more than
10 years, the cross subsidy cannot be brought down in
one Financial Year. Therefore, the cross subsidy level
was slightly higher than + 20% of the average cost of
Page 14 of 40
Appeal No.88 of 2012
supply. The Appellant being the commercial
organisation has to pass through the electricity charges
to its consumers. Hence, the question of tariff shock
would not arise.
22. The above submissions would show that the impugned
order dated 8.9.2011 passed by the Rajasthan State
Commission has been challenged by the Appellant in this
Appeal on the issues referred to above, which can be
grouped into two main grounds. Those are:
(a) Change of categorization
(b) Cross subsidy
23. Elaborating these issues, the Appellant has submitted the
following:
(a) The Appellant, being a telecom service
Company, is providing essential services. Hence its
tariff will have to be decided considering its nature of
services. When that being so, the Appellant cannot be
placed in the category of commercial consumers in
contravention of Section 62(3) of the Electricity Act,
2003.
(b) The State of Rajasthan issued IT Policy 2007
which was effective till 31.3.2012. This policy was
issued on the recommendations of the Rajasthan State
Page 15 of 40
Appeal No.88 of 2012
Commission. On that basis, the Appellant has
originally been categorised under mixed load category.
The said categorisation cannot be changed. Therefore,
the State Commission has to categorise the Appellant
according to nature of supply i.e. essential services.
(c) The State Commission failed to comply with the
mandate of National Electricity Policy to maintain the
cross subsidy level at + 20% of the average cost of
supply. In the present case, the tariff of the Appellant
has been increased from Rs.3.75 to R.5.90 i.e. 58%
increase. This has led to tariff shock to the Appellant.
24. While dealing with these issues raised by the Appellant, it
would be appropriate to consider the background of the case
by referring to the chronological events which led to the filing
of this Appeal:
(a) In the year 2000, State of Rajasthan pronounced
its IT Policy, 2000. By this policy, some incentives
were granted to the IT industry. The Telephone
exchanges were categorised under Non Domestic
Service (NDS) Category.
(b) On 17.12.2004, the State Commission
determined the retail tariff. In that order, the State
Commission accepting the contentions of the
Distribution Companies categorised the tariff of BSNL
Page 16 of 40
Appeal No.88 of 2012
with Radio Stations, TV Stations etc., under mixed load
category. However, its exclusive offices had been
categorised under Non Domestic Service Category.
(c) In the year 2007, the State Commission took up
the suo-moto Petition No.130 of 2007, regarding the
determination of tariff of the Distribution Licensees. In
those proceedings, the Distribution Licensees
contended that the Ratio Stations, TV Stations and
their Transmitters, telephone/mobile exchanges/
switches including attached offices have to be included
in Schedule ML/LT-2. Accepting the said contention,
the State Commission directed the categorisation of the
same in mixed load category. This order was passed
on 31.8.2007. In compliance of this order, the
Distribution Companies issued an order dated
24.9.2007 incorporating the modifications as directed
by the State Commission.
(d) In the year 2007, the State of Rajasthan had
declared IT and ITES as Public Utility Services under
the provisions of Industrial Disputes Act, 1947.
Besides this, the State Government on the
recommendations of the State Commission changed
the applicable category of tariff from commercial to low
tension industry category.
Page 17 of 40
Appeal No.88 of 2012
(e) In January, 2011, the Distribution Company filed
its ARR and Retail Tariff Petition for the Financial Year
2011-12 before the State Commission along with a
proposal for inclusion of tariff for telephone/mobile
exchanges/switches including attached offices in NDS
category on the ground that telephone Companies run
on commercial basis. Accordingly, the State
Commission, by the impugned order dated 8.9.2011,
determined the tariff of the Distribution Companies
accepting the proposal of the Distribution Companies
and categorising the Appellant and all other telephone
exchanges in NDS category. This order is challenged
in this Appeal.
25. In the light of the above background, we shall analyse the
grounds raised by the Appellant.
26. The 1st ground relates to change of Categorisation.
27. At the outset, it shall be stated that Section 62(3) of the
Electricity Act, 2003 permits differential tariff on the basis of
"nature" and "purpose" for which the supply is required and
as such, the State Commission is entitled to fix appropriate
tariff for the telecom sector u/s 62 (3) of the Electricity Act,
2003.
28. Section 62(3) of the Electricity Act, 2003 is reproduced
below:
Page 18 of 40
Appeal No.88 of 2012
62. Determination of Tariff
(1)........................
(2).........................
(3)The Appropriate Commission shall not, while
determining the tariff under this Act, show undue
preference to any consumer of electricity but may
differentiate according to the consumer's load factor,
power factor, voltage, total consumption of electricity
during any specified period or the time at which the
supply is required or the geographical position of any
area, the nature of supply and the purpose for which
the supply is required".
29. The above section namely Section 62(3) uses the
expression "shall not show any undue preference to any
consumer". This means no undue preference to be made
but due preference may be made. Thus, what is prohibited
is a preference of an undue nature. In other words, there
should be proper reasoning for giving due preference.
30. The justification for reduction of tariff depending upon the
nature of activity being carried out by the consumers are
given in two categories. In the first category, a lifelong
consumer below poverty level can be given preference in
the tariff based on his non affordability. Similarly,
agricultural consumers also are given preference because of
the important nature of the activities.
31. The second category is the primary school being run in the
villages where otherwise schooling facility is not available.
Page 19 of 40
Appeal No.88 of 2012
Considering the nature of the activities being carried out, the
State Commission can decide to reduce the tariff. Similarly,
the primary health centres or spiritual centres meant for
social up-liftment, public work, street lighting etc., can be
given preference because of the nature of services rendered
by them.
32. In the present case, the nature and purpose of supply has
been taken into consideration while determining the tariff.
Non Domestic Service Category is a residuary category.
Consumers who are covered under any other category
namely domestic, public street lighting, agricultural,
industrial and mixed load have been covered under NDS
category.
33. Earlier, P&T Department, Government of India was the only
player in the telecom sector. In 2004's tariff order, the
Government owned BSNL was kept under mixed load
category while other private telecom operators were covered
under NDS category. Only in the order dated 31.8.2007, the
Commission brought all telecom operators, including the
Appellant under one category namely mixed load category.
However, the Distribution Companies proposed for re-
categorisation of all telecom operators including BSNL into
NDS category looking to the fact that all telecom Companies
are run on commercial basis. In that context, the State
Commission accepted the proposal of the Distribution
Page 20 of 40
Appeal No.88 of 2012
Companies by observing that by the passage of time and
development in the Sector, the business characteristics of
these organisations have considerably changed and
therefore in view of the change of circumstances, the
proposal of Distribution Companies was to be accepted with
all telecom operators being kept in NDS category.
34. According to the Appellant, since it has been considered as
an essential service under Essential Service Maintenance
Act or by the Planning Commission, it should be categorised
as a mixed load category. This submission cannot be
accepted for the reason that treatment of the Appellant as
essential service under any other enactment or by any other
authority is not binding on the State Commission. The State
Commission has to determine the tariff having regard to the
provisions of the Electricity Act, Tariff Policy and its
Regulations. On that basis, the State Commission has
accepted the proposal of the Distribution Companies.
35. The relevant observations of the State Commission in the
impugned order dated 8.9.2011 are as follows:
"18.5.1 Discoms have proposed to include all
telephone service operators (BSNL or otherwise),
telephone/mobile exchanges/switches including
attached offices under NDS category as the telephone
companies are run on a commercial basis and should
not be kept at par with the GoI-P&T Department which
so far have been covered under ML/LT-7.
Page 21 of 40
Appeal No.88 of 2012
18.5.2 Commission finds force in this proposal. Some
of the objectors also raised the issue. Last tariff order
was issued in 2004 and since then telecom Sector has
witnessed sea change and a total transformation.
Commission, therefore, accepts the proposal of
Discoms in this regard."
36. So, the above observations would make it clear that the
State Commission has given a finding that subsequent to
the last tariff order passed in 2004, telecom sector has
witnessed a sea change and a total transformation and as
such, the telephone companies are run on commercial
basis. Consequently, the State Commission has accepted
the proposal of the Distribution Companies in this regard.
37. According to the State Commission, the operations of the
telecom operators are run on a commercial basis that is with
an aim to earn profit. They try to induce the consumers for
their services in a manner akin to any other business. Since
the activities of all telecom operators are similar, the tariff for
all telecom operators is also being kept at par including
BSNL and as such there is no discrimination caused to the
Appellant on this account.
38. According to the Appellant, the Appellant is engaged in
Public Utility Service and providing essential services and as
such, they should be equated with the Charitable Trusts,
Hospitals and Charitable Organisations. This also cannot be
accepted.
Page 22 of 40
Appeal No.88 of 2012
39. It cannot be denied that the Appellant had been established
in order to provide Public Services and accordingly, it has
been serving. However, the Appellant cannot claim any
such exemption or concession on this account.
40. As pointed out by the State Commission, the predominant
object of the Appellant and other telecom operators is to
earn profit. In fact, telecommunication is only one part of the
service provided by the Appellant and other
telecommunication services. The other services provided by
the Appellant like data transfer by various modes namely
2G, 3G and 4G, promotional and competitive SMSs are
services purely of commercial nature and offered with the
main object of earning profit.
41. That apart, the services of telecom operators used by the
consumers for social networking on Face Book, You tube,
Twitter and Orkut etc., also cannot be treated as essential
service. Moreover, the telecom operators also earn
considerable revenue from the above services.
42. The learned Counsel for the Appellant relies upon the
Clause 2.9.4 of the IT and ITES policy, 2007 wherein the
State Government has changed the applicable category of
tariff from commercial to low tension industrial category for
IT and ITES units.
Page 23 of 40
Appeal No.88 of 2012
43. IT Policy and other policies issued by the State Government
and classification made by the State Government for
providing incentives under various programmes etc., do not
have any role in tariff determination process. It cannot be
denied that the jurisdiction for change of categorization is of
the State Commission and not of the State Government.
That apart, for the purpose of tariff determination by the
State Commission, telecom services does not fall under the
category of IT industry. As a matter of fact, in the tariff order
dated 31.8.2007, the State Commission treated the IT
industry differently from the telecom companies. This is
evident from Para 96 and 111 of the said order.
44. The findings given in Para 96 and 111 are quoted below:
"96. The Commission agreed to the proposal for
incorporating the residuary clause in NDS category
and retain the classification of Radio Station/TV
Station, their transmission, telephone/mobile
exchange switches including attached offices without
any distinction of its ownership of BSNL/MTNL in the
category of ML/LT-7. The Discoms may amend the
Tariff Schedule accordingly."
.............................
111. The Companies of IT industries registered under Companies Act with aim and object of IT or those registered with industries Department of GoR for IT under IT & ITES Policy of GoR whether located within Industrial area or outside be treated as industries and categorised accordingly."
Page 24 of 40 Appeal No.88 of 201245. This finding is perfectly valid. In any event, the observation in Para 2.9.4 in IT & ITES industries policy are only in the context of IT and ITEs industries and they have no relevance to the case of telephone operators. Therefore, the notification relied upon by the Appellant in order to borrow the definition of IT/ITES industries, has no application to the present case.
46. While dealing with the contentions of the Appellant that the Appellant being a provider of essential services cannot be placed in the category of commercial consumers, the State Commission, in the impugned order, has pointed out that the State Commission has not shown any undue preference to any consumer as all mobile/telephone service providers, whether owned by the Government or privately owned have been kept at par by placing all mobile/telephone service providers in the Non Domestic Service category.
47. As pointed out by the learned Counsel for the State Commission, earlier, only BSNL/MTNL that were Government agencies, were providing telecommunication services. However, with the passage of time, many private operators came to this field for doing their business with the intent to earn profit. The State Commission having considered this, have placed them in NDS Category.
Page 25 of 40 Appeal No.88 of 201248. In regard to the reliance of the IT Policy issued by the State Government, the learned Counsel for the State Commission has correctly pointed out that this Tribunal in a number of cases has held that even the directions of the State Commission u/s 108 of the Electricity Act, 2003, are not binding on the State Commission while determining the tariff.
49. In view of the settled position of law, it has to be observed that the policy of the State Government is not binding on the State Commission and it has to determine the tariff in accordance with the Act and Regulations framed therein.
50. That apart, the policy of 2007, did not mention that either categorisation or the tariff of the Appellant cannot be changed. Merely because the Appellant has been declared as essential service provider under the Industrial Disputes Act, 1947 and other Acts, it cannot claim concession as it has been providing services to its consumers on commercial basis.
51. The learned Counsel for the State Commission has further pointed out that the very same impugned order had been already challenged in other Appeal on the very same ground in Appeal No.39 of 2012 filed by the Rajasthan Engineering College Society which has been rejected by this Tribunal.
Page 26 of 40 Appeal No.88 of 201252. Let us now refer to the relevant observations and findings made by this Tribunal in the said judgment:
"20. Section 62(3) permits the State Commissions to differentiate between the tariffs of various consumers. The expression "may differentiate" as found in Section 62(3) clearly indicates that there shall be a judicial discretion to be exercised with reasons. It is well settled that any discretion vested in the statutory authorities is a judicial discretion. It should be exercised supported by the reasons. In other words, the categorization of the consumers should be based upon the proper criteria legally valid. It cannot be arbitrary.
21. We would now examine the question before us in the light of background elaborated as above.
22. According to the Appellant, the Commission, while fixing tariff, can differentiate between the consumers only on the following grounds which are specified in the Section 62(3) of the Act and not on any other ground:
1) 'Load factor'
2) 'power factor'
3) 'Voltage'
4) 'Total Consumption of electricity during any specified period'.
5) 'Geographical position of any area'.
6) 'Nature of supply'
7) 'Purpose of which supply is required.'
23. As per the Appellant the State Commission has re-
categorized the Appellant from Mixed-load to Non- domestic category but Education Institutes run by Government have been kept under Mixed-load category. Thus, the Commission has differentiated on Page 27 of 40 Appeal No.88 of 2012 the basis of ownership, which is not permissible under the law.
24. It is true that Commission cannot differentiate on nd any other ground except those given in 2 part of Section 62(3) of the Act. However, the grounds mentioned in the Section are Macro level grounds and there could be many micro level parameters within the said macro grounds. The term 'purpose for which supply is required' is of very wide amplitude and may include many other factors to fix differential tariffs for various categories of consumers as explained below:
25. It could be argued that while residential premises are charged at domestic tariff, the Hotels are being charged at Commercial tariff. Both, the residential premises and the hotels, are used for purpose of residence and, therefore, cannot be charged at different tariff because purpose for the supply is same. The argument would appear to be attractive at first rush of blood, but on examination it would be clear the purpose for supply in both the cases is different. The 'Motive' of the categories is different. Whereas Hotels are run on commercial principles with the motive to earn profit and people live in residences for protection from vagaries of nature and also for protection of life and property. Thus 'purpose of supply' has been differentiated on the ground of motive of earning profit. The fundamental ground for fixing different tariffs for 'domestic' category and 'commercial' category is motive of profit earning. In this context it is to be noted that in even charitable 'Dharamshalas' are charged at Domestic tariff in some states. The objective of Dharmshalas and Hotels is same i.e. to provide temporary accommodation to tourists/ pilgrims but motive is different; so is the tariff. Thus the 'Motive of earning profit' is also one of the accepted and recognized criterions for differentiating the retail tariff.
Page 28 of 40 Appeal No.88 of 201253. In that case also, the Appellant namely Rajasthan Engineering College Society has been re-categorised from mixed load category to Non Domestic Service category. The Tribunal held that the re-categorisation is perfectly justified even though the other educational institutions run by the Government have been kept under the mixed load category. But, in this case, the State Commission has put all the private owned Companies as well as the Government Companies into one category by shifting them from mixed load category to NDS category.
54. The Appellant has relied upon the judgment of this Tribunal in the case of Association of Hospitals vs MERC in the judgment in Appeal No.110 and 111 of 2009 dated 20.10.2010. The perusal of the said judgment would not support the Appellant but in fact, supports the impugned order of the State Commission. The relevant observations of this Tribunal in the above judgment are as follows:
" 17............................
(v) The State Commission has proceeded to re-
categorise the charitable trust hospitals which run on no profit motive from the category of LT Domestic and HT Industry and grouped them in the highly profit motive commercial categories and subjected to Charitable Hospitals in the tariff. The above grouping amounts to treating the charitable hospitals along with commercial entities is not a reasonable classifications Page 29 of 40 Appeal No.88 of 2012 which has no nexus for the purpose for which the electricity is used.
.............................................
32. The grouping of the institutions in HT II category along with commercial consumers reflects complete non-application of mind. The multiplexes and shopping malls and other High Tension electricity users as also the existing HT II consumers are purely commercial establishments. The Appellant cannot be put into the category of those persons. This amounts to treating unequal as equals which is clear violation of Article 14 of the Constitution of India. The consumers who utilise electricity to generate profits are in a class apart from the consumers such as the Institutions utilising electricity to advance the cause of charity education and essential services.
33. Section 62 (3) uses the expression "shall not......show undue preference to any consumer". This means that due preference can be given. What is prohibited is a preference of undue nature. There should be rationale or reason for giving due preference. The justifications for reduction in tariff depending upon the nature of the activity being carried out by the consumer are given in two categories. In the first category, a life line consumer below poverty level can be given preference in the tariff based on his non-affordability. Similarly, agricultural consumers can be given preference because of the important nature of activities. In the second category, a primary school being run in the village where otherwise schooling facility is not available, though the school may be able to afford to pay the cost of electricity, considering the nature of the activities being carried out, the State Commission can decide to reduce their tariff. Similarly, a primary health centre or a Spiritual centre for the social up-liftment can be considered. Similarly a public Page 30 of 40 Appeal No.88 of 2012 work, street lighting etc can be given preference because of the nature of service rendered by them.
34. The application of mind should be on identifying the categories of consumers who should be subjected to bear the excess tariff recoverable based on a valid reason and justification. The re-categorisation of Charitable Hospitals and charitable organisations and grouping them with the consumers of the category such as Shopping Malls, Multiplexes, Cinema Theatres, Hotels and other like commercial entities is patently erroneous. The Charitable Service oriented Organisations cannot be equated with the above class of commercial business.
..........................................
39. The categorisation of the Charitable Trust Hospitals together with Malls Multiplexes and Cinema Theatres is patently erroneous. This would amount to treating unequal as equals and in a way it is a violation of Article 14 of Constitution of India. Consumers who utilise the electricity to provide luxury and entertainment and thereby generating profit fall in a totally different class of consumers dealing with entertainment and other luxurious activities. Such consumers cannot be equated with or put in the same category as the consumers such as Public Trust Hospitals which utilise electricity for benevolent objectives of providing health care, human life saving and for relief from health hazard and not making any profit for any one.
55. The above judgment would indicate that this Tribunal has held that re-categorisation of the charitable trust hospitals which run on no profit motive with commercial entities is not reasonable.
Page 31 of 40 Appeal No.88 of 201256. In that decision, it has been held that the charitable service oriented organisations cannot be equated with the class of commercial business. As such, this judgment is supporting the impugned order passed by the State Commission. Therefore, the reliance by the Appellant on this judgment is misplaced.
57. The learned Counsel for the Appellant cited one more judgment in the case of Delhi Jal Board Vs Delhi Electricity Regulatory Commission (MANU/ET/0069/2012). This judgment also does not support the case of the Appellant. In fact, the said judgment supports the stand of the State Commission. The relevant observation is as follows:
"7...............Therefore, merely because the Appellant is engaged in public utility service and providing essential services of water supply, sanitation etc., that itself cannot be taken as a criteria for the concessional tariff determination."
58. In view of the above decisions, it cannot be concluded that the Appellant who is telecom service provider, which is an essential service, cannot automatically claim to have a concessional tariff determination. As a matter of fact, as indicated earlier, the predominant object of the Appellant and other telecom operators is to earn profit. Moreover, as mentioned earlier, telecommunication is only one part of the services provided by the Appellant and other telecom operators. The other services provided by the telecom Page 32 of 40 Appeal No.88 of 2012 operators are services purely of commercial nature and offered with the main object of earning profit. The fundamental ground for fixing different tariff for domestic category and commercial category is motive of profit earning.
59. The Appellant has cited one more judgment of this Tribunal in Appeal No.195 of 2009 in the Case of Mumbai International Airport Vs Maharashtra State Commission in support of its claim. That judgment would also not apply to the present case because in that case, this Tribunal has held that even in respect of Airport which is a public utility service, the differential tariff would be charged for purely aviation services and the commercial activities carried out at the airport. Therefore, none of the judgments cited by the learned counsel for the Appellant would be of any help to the Appellant's stand.
60. On the other hand, the learned Counsel for the State Commission has cited the judgment of Hon'ble Supreme Court in the case of W.B. vs Rash Behari reported in (1993) I SCC 479. In this judgment, the Hon'ble Supreme Court has held that a commercial or profit making venture has always been considered to be a class different from the one engaged in non commercial activities. It is further held that the classification based on such distinction is well Page 33 of 40 Appeal No.88 of 2012 recognised as valid for the purposes of revenue. The relevant extract from the said judgment is quoted below:
"6. .............................................A commercial or profit making venture has always been considered to be a class different than the one engaged in non- commercial activities. Classification based on such distinction is well recognized and is accepted as valid for purposes of revenue."
61. As stated above, the State Commission has got full right to categorise various consumers u/s 62 (3) of the Act, 2003 wherein the nature of supply is one of the factors as laid down by this Tribunal as well as Hon'ble Supreme Court.
62. In view of the above discussions, we do not find any merit in the contention urged by the learned Counsel for the Appellant that re-categorisation is wrong.
63. The next issue is with regard to Cross Subsidy.
64. According to the Appellant, the State Commission by changing the category of the Appellant, has substantially increased and burdened the Appellant with the cross subsidy in contravention of the tariff policy and several judgments of this Tribunal. The learned Counsel for the Appellant has cited the judgements rendered in the case of 2011 ELR (APTEL) 1022 Tata Steel Limited Vs Orissa State Commission and 2007 ELR (APTEL) 492 Udyog Nagar Factory Owner's Association vs Rajdhani Power Limited in order to show that the cross subsidy must be within + 20% Page 34 of 40 Appeal No.88 of 2012 of the average cost of supply and this has been contravened in the present case.
65. On the other hand, the learned Counsel for the Respondent pointed out that the very same issue arising out of the impugned order 8.9.2011 has been raised in the other Appeal 182 of 2011. This Tribunal has in Appeal No.182 of 2011 rejected the similar contention urged in this Appeal and confirmed the findings of the impugned order while dismissing the Appeal. As the very same impugned order, the subject matter of this Appeal, has been confirmed by this Tribunal in the said judgment in Appeal No.182 of 2011, it would be necessary to refer to the relevant observations made by this Tribunal in the said judgment.
66. The relevant question and the discussions leading to the findings which has been given in Appeal No.182 of 2011 is quoted below:
"21. The third question for consideration is as to whether the State Commission has acted consistent with the provisions of the Electricity Act, the policies notified by the Central Government under Section 3 of the Electricity Act, 2003, Tariff Policy and Tariff Regulations, 2009 in determining the appropriate cost to supply and in dealing with cross subsidies in the tariff.
22. Admittedly, the State Commission has not determined the average cost of supply, category wise cost of supply and the cross subsidy elements in the impugned order. Section 61(g) of the Act stipulates that Page 35 of 40 Appeal No.88 of 2012 the tariff progressively reflects the cost of supply and also reduces the cross subsidies. Thus it is essential that these parameters are determined and appropriately reflected in the tariff orders. However, we are not inclined to remand back the impugned order on this technical ground and would like to examine the issue as to whether the cross subsidies have been reduced and brought to within ± 20% of average cost of supply.
st "23. The 1 Respondent State Commission in its reply has provided a table showing category wise cross subsidies as per last tariff order dated 17.12.2004 and the impugned order dated 8.9.2011. The said table is set out below:
Category 2004-05 (after increase) 2011-12 (after increase) Average Cost of Service Rs.4.12/kWh Average Cost of Service Rs.5.25 /kWh Realization Cross Sales Revenue Av. Realization Cross Sales Revenue Av Rate as % of av. Subsidy MU Rs. Rate as % of Av Subsidy MU Rs.Crore Rs./Unit COS Crore Rs/Unit COS Non Domestic 500 285.43 5.71 138.53% 38.53% 1117 724 6.48 123.48% 23.48% Small Industry 193 90.48 4.69 113.77% 13.77% 268 146 5.45 103.86% 3.86% Medium Industry 321 142.4 4.44 107.65% 7.65% 651 365 5.61 106.93% 6.93% Large Industry 1288 541.41 4.20 102.01% 2.01% 4046 21.34 5.27 100.46% 0.46% Public Waterworks 24 10.06 4.19 101.72% 1.72% 26 14 5.33 101.52% 1.52% (M) Public Waterworks (L) 82 34.84 4.25 103.10% 3.10% 130 67 5.19 98.85% -1.15% Bulk supply to Mixed Load 98 41.94 4.28 103.85% 3.85% 533 282 5.28 100.58% 0.58% Electric Transaction 268 109.8 4.10 99.42% -0.58% 409 218 5.32 101.35% 1.35% Railways
24. Perusal of the above table would reveal that cross subsidies have been reduced for all the subsidizing categories.
It also reveals that cross subsidies have been brought within the permissible limit of ± 20% of average cost of supply except for the non-domestic category. Thus the essential requirement in reducing the cross subsidies and bringing then within ± 20% of average cost of supply has been achieved except for one category of consumers.
Page 36 of 40 Appeal No.88 of 201225. Thus the essential requirements of the Act and the Tariff Policy have been achieved. This question is also answered against the Appellants accordingly.
67. The perusal of the findings referred to above, would show that this Tribunal rejected the contentions urged by the Appellant in that Appeal with regard to cross subsidy and upheld the impugned order.
68. It is contended by the Appellant in the present case that in the tariff order for NDS category, the cross subsidy has been fixed above + 20%. It is settled law that one of the factors guiding the determination of tariff will be that it progressively reflected the cost of supply and cross subsidy have to be reduced progressively. The electricity policy provides for progress and gradual reduction of the cross subsidy of the subsidizing consumers without giving tariff shock to the subsidized consumers.
69. According to the Appellant, the cross subsidy recovered from the Appellant has increased from Rs.3.85% to Rs.23.48%. This is not factually correct. The fact remains that the categorization of the Appellant has been changed from mixed load to Non Domestic Service category. However, the cross subsidy in the Non Domestic Service category has not been increased but reduced from 38.53% in 2004-2005 tariff order to 23.48% in the impugned tariff order for the year 2011-12.
Page 37 of 40 Appeal No.88 of 201270. It is contended by the Appellant that the judgment in Appeal No.182 of 2011, will not apply to the present case since in the said Appeal, the category of the Appellant was not changed whereas the category of the Appellant in this case has been changed from mixed load to NDS category and as such, the said judgment would not apply to the present case.
71. This contention is not tenable in view of the fact that the judgment in Appeal No.182 of 2011 rejecting the contentions with regard to cross subsidy has been followed in Appeal No.39 of 2012 filed by Rajasthan Engineering College Society and in the said Appeal, the Appellant namely Rajasthan Engineering College Society had not only challenged with regard to cross subsidy but also challenged the change of its categorisation from mixed load to Non Domestic Category as in the present case. Therefore, the findings rendered in Appeal No.39 of 2012 would squarely apply to the present case also.
72. It is also pointed out by the learned Counsel for the Respondent that since the tariff of the Appellant and similarly situated consumers has been modified after more than 10 years, the cross subsidy cannot be brought down in one Financial Year and thus the cross subsidy level was slightly higher than + 20% as mentioned in the National Electricity Policy.
Page 38 of 40 Appeal No.88 of 201273. As observed by this Tribunal in Appeal No.182 of 2011, the table in the impugned order would reveal that the cross subsidy has been reduced for all the subsidizing categories except for one category of consumers for the above reasons.
74. Therefore, the findings in regard to this issue given by the State Commission cannot be said to be wrong especially when the findings given by the State Commission on this issue has been confirmed by this Tribunal in Appeal No.182 of 2011. We agree with the views expressed by this Tribunal in the above judgment.
75. Consequently, this issue is also decided as against the Appellant.
76. Summary of the findings:
i) The Appeal has been filed by the Appellant as an aggrieved person over the impugned order and as such, the Appeal is maintainable. The same principle has been laid down by this Tribunal in 2010 ELR(APTEL)4040 BSES Rajdhani Power Ltd., Vs DERC and in Appeal No.182 of 2011 in case of Rajasthan Steel Chambers Vs Rajasthan State Commission.
ii) In the present case, the nature and purpose of supply has been taken into consideration while Page 39 of 40 Appeal No.88 of 2012 determining the tariff. We do not find any infirmity in the order re-categorising the Appellant and all telecom operators in Non Domestic Service Category.
iii) The contention of the Appellant regarding cross subsidy is rejected in the light of the findings of the Tribunal in Appeal Nos.182 of 2011 and 39 of 2012.
77. In view of our above findings, there is no merit in the Appeal. Hence, the Appeal is dismissed. However, there is no order as to cost.
(Rakesh Nath) (Justice M. Karpaga Vinayagam)
Technical Member Chairperson
Dated: 20th May, 2013
√REPORTABLE/NON-REPORTABALE
Page 40 of 40